Aggressive cost cutting and improved cash management by firms has meant the number of businesses falling into administration dropped in early 2010. The number of businesses that went into administration in the first quarter of 2010 was 555, which is a significant improvement on the 1,028 businesses in the same period last year. However, there are many businesses that are finding themselves in a difficult position and it is expected that cuts in government spending will add further pressure.
The Business Sale Report, which for the last fifteen years has published lists of businesses that have just entered administration, has recently seen a huge increase in enquiries from investors looking to buy businesses in distress. When questioned, many entrepreneurs say there are opportunities to increase market share where competitors were struggling. Many of these poorly performing businesses had underlying profitability and were caught in a cash-flow crisis. They often go on to thrive when a new buyer can inject the much-needed capital in the absence of banks that have been unwilling to extend further credit.
In response to this demand, the Business Sale Report has launched its winding-up petitions alerts service, at http://www.business-sale.com/latest-winding-up-petitions.html which gives details of businesses that have had winding-up petitions lodged against them. This is an advance warning that a business may be forced by the court to be declared insolvent. These details are published prior to the pre-arranged court date, so there is a vital window of opportunity for an investor to step in.
For anyone contemplating buying a business in difficulty, they would be well advised to only buy a struggling business if they understand exactly why it is in trouble. It is also imperative that the buyer knows how to turn the failing business around. A strong track record in the troubled business' sector is highly desirable, and the buyer should ensure they do a very thorough investigation, as struggling businesses have, in some cases, learnt to conceal the reality of their financial position.